EUR/USD Forecast: Seems vulnerable amid fresh coronavirus jitters

The EUR/USD pair came under some renewed selling pressure on Thursday and refreshed monthly lows amid a strong pickup in the US dollar demand. The global risk sentiment took a hit on the back of fading hopes for additional US fiscal stimulus measures before the presidential election on November 3 and fresh coronavirus jitters. It is worth recalling that the US Treasury Secretary Steven Mnuchin said on Wednesday that he and the House of Representatives Speaker Nancy Pelosi remain “far apart” on spending priorities. Adding to this, a steep rise in COVID-19 infections fueled fears that the new wave of lockdown measures could stall the global economic recovery. This, in turn, forced investors to take refuge in the safe-haven greenback and exerted some pressure on the major.

The USD stood tall and seemed rather unaffected by mixed US macro data. In fact, the Empire State Manufacturing index missed expectations and dropped to 10.5 in October from 17.0 previous. Separately, the Initial Weekly Jobless Claims unexpectedly jumped to 898K during the week ending October 10th. The previous week's reading was also revised higher to 845K from 840K reported earlier. Meanwhile, the Philly Fed Manufacturing Index surged to 32.3 in October as against consensus estimates pointing to a modest downtick to 14 from the previous month's reading of 15. The data, however, did little to impress the euro bulls. However, an intraday recovery in the US equity markets extended some support to the pair and helped limit any deeper losses, at least for the time being.

The pair now seems to have stabilized and was seen hovering near the 1.1700 mark through the Asian session on Friday. Market participants now look forward to the final version of the Eurozone consumer inflation figures. Later during the early North American session, the release of the US Retail Sales data will influence the USD price dynamics and provide some impetus. Friday's US economic docket also features the release of Industrial Production data and the preliminary estimate of the October Michigan Consumer Sentiment Index. This, along with the broader market risk sentiment, should assist traders to grab some meaningful opportunities on the last day of the week.

Short-term technical outlook

From a technical perspective, the overnight slide below the 1.1700 mark comes on the back of this week’s bearish breakthrough a two-week-old ascending trend-line support. Hence, a subsequent fall back towards September monthly swing lows, around the 1.1615-10 region, now looks a distinct possibility. Some follow-through selling below the 1.1600 mark might prompt some technical selling and turn the pair vulnerable. The downward trajectory could then get extended towards the key 1.1500 psychological mark before the pair eventually drops to the next major support near the 1.1460-55 horizontal zone.

On the flip side, immediate resistance is now pegged near the 1.1740 area. This is closely followed by 200-hour SMA, around the 1.1765 region. Any further move up might still be seen as a selling opportunity near the mentioned trend-line support breakpoint, currently around the 1.1800 mark. This, in turn, should cap the upside for the major near weekly tops, around the 1.1825-30 supply zone.